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Monday, October 07, 2013

It’s no secret that the 2008 credit crisis hit the medical field hard, and even five years later, a lack of access to financing options can create a barrier between doctor and patient. Day after day, doctors are forced to turn down care for solely financial reasons.

Whereas third-party financing companies once served as an effective ally by loaning patients money to afford procedures they desperately need, tightening approval rates have slashed the number of leads doctors can accept. When middleman financiers are employed, it is entirely possible that only 20-25% of interested patients can end up booking a surgery. Not to mention that the approval often comes with a 6-10% discount fee paid to the financier.

For doctors looking to expand their business and offer care to more patients, the third-party financing paradigm is looking less and less viable. It’s no wonder many have taken matters into their own hands by setting up their own in-house financing programs. If executed correctly, an in-house financing program can grow the business in terms of the number of procedures performed, while saving money paid in third-party discounts, and even create new revenue streams as interest comes in on monthly payments.

While providing loans in house means taking on a bit of risk, implementing smart payment plan practices can greatly reduce said risks. For example, say a patient seeks a $6,000 procedure, $1,500 of which covers hard costs (such as the surgery center or office overhead, etc.). If the practice requires a down payment of at least $1,500, they’ll still be covered even if the patient defaults immediately after the surgery.

If insurance can cover a portion of the procedure, the numbers become even more favorable. Say the patient is left with a $2,000 co-pay on the above procedure, and can’t pay out of pocket. Since the insurance is already paying $4,000 — covering our hard costs, and then some — a payment plan can be used to cover the gap. Since hard costs are covered, the down payment can be more modest, but it’s still prudent to collect something incase of a default.

The above solutions are both possible with third-party financing, but keep in mind a third party financier will often require 6-10% of the entire payment, including that crucial down payment. Thus, if a $6,000 procedure requires a $1,500 down payment, the practice is required to pay out $360-$600 to their financing company. And that’s only if the patient is approved for financing in the first place. While the practice assumes slightly more risk by extending their own credit to the patient, many doctors we’ve spoken to assert that the immense upsurge in their number of office visits more than made up for it.

The added administrative work that comes with tracking and billing payment plans can be a concern as well, but modern advances in patient-financing software takes care of this process by automating all the billing along with providing tools to keep patients on track.

With the proper tools and framework, many doctors are seeing in-house financing software as a realistic alternative to traditional methods, allowing them to say “yes” to more procedures, while growing their practice at a comfortable rate.